A few months ago Joanne Rowling was broke. Now film studios are fighting over rights to her children's novel.

JOANNE Rowling, a familiar solitary figure at a table in the upstairs window, asks the waiter for a menu: "You're going to eat?" he says, incredulity causing him to drop his swishing napkin. For three and a half years, Rowling has been a regular at Nicolson's, off Princes Street in Edinburgh, ordering up espresso and a glass of water and writing a novel in laborious longhand, her baby daughter sleeping alongside. It's a scene, you might think, from the romantic fiction of Paris in the Fifties rather than a picture of life on income support in Scotland, 1994.

There were days, Rowling recalls, when she would manoeuvre the buggy down Nicolson's staircase, her legs shaking from the caffeine overdose. Today, thanks to the blinding, disorienting financial success of [Harry Potter and the Philosopher's Stone], Rowling likes to give her interviews here in the caf, the size of a dance hall. Its staff are on hand and are as close as family and discreetly proud of their prodigy.

There are appealing parallels between life and art. The isolation of the slight, self-absorbed 31-year-old woman, red-gold head bent over sheets of paper at a table while a noisy, gregarious institution bustles about her, is reflected in the life of Harry Potter, spooling from her pen. He is an orphan whose arrival in the human world is heralded by flocks of daylight-flying owls, persecuted for the first 11 years of his life by cruel, earthbound, suburban parents until whisked off to magic boarding school, to learn the science of wizardry. From here on the story is that of Armageddon fought on the playing fields of Greyfriars.

Earlier this month, on the day after Melvin Burgess won the hugely prestigious Carnegie Medal for children's fiction for [entitled: Junk], his chronicle of the bleak realities of heroin addiction, Rowling made a brisk case for escapism in children's literature.

There is a place for both, she maintains. Bloomsbury, which published Harry Potter here last month, also believes so, and the argument is strengthened by the $100,000-plus deal that Rowling has signed with the Scholastic Press in America, for the first of a series of seven Harry Potter books. Four film companies - two British, two American - have made offers for the rights. Rowling read and loved [Kes] as a child, but she also revelled in [Narnia] and [Ballet Shoes] and Paul Gallico. Yet she says that fantasy doesn't greatly appeal to her.

"I don't read it; and it feels odd to speak of what I've written as fantasy. It's all set obviously in a very fantastical context, but some of the characters I think we've all met. Harry has no parents to love; his affections and loyalties are to his friends, but there are adults around who he feels might be his parents. I'm far more interested in those ideas."

The fragility of human relationships is a recurring theme of Rowling's own life. The idea of Harry Potter and a boarding school for wizards came to her on a delayed train from Manchester to London in 1990. Unusually she was without pen and paper and was stuck for four hours with her big idea and nothing to write it on. Three months later her mother, aged only 45, died from multiple sclerosis.

"She was a compulsive, continual reader and that rubbed off on me. I had no idea that MS would hit her so quickly. And I wasn't there. That stirs up such guilt. She knew I wrote, but she never read any of it. Can you imagine how much I regret that? There's a chapter in the book where Harry sees his dead parents in a magic mirror, and I know that if my mother hadn't died I would have treated that a lot less seriously."

The daughter of a manager at Rolls-Royce who has since remarried, Joanne grew up in Chepstow, Gwent, by her own account, "a swotty little git with National Health spectacles" at the local comprehensive school. She got a degree in French and Classics at Exeter, then went to London to work for Amnesty International. Soon, though, she moved to Manchester to join her boyfriend from university days, taking an office job with the university there. It was then that her mother died.

"That made me think very hard about what I was up to. I had been an assistant, an auxiliary teacher, in Paris as part of my degree course and I suddenly realised that I had really enjoyed it - sitting in Manchester, I thought it was something I'd like to do again. So about nine months after Mum died I took off for Oporto and taught English."

In Portugal, in rapid succession, Rowling taught, wrote three chapters of Harry Potter, met and married a Portuguese journalist and gave birth to her daughter, Jessica. The baby was three-and-a-half months old when the marriage broke up, bringing Rowling to stay with her sister in Edinburgh at Christmas in 1993. The child is named after Rowling's heroine, both in life and literature, Jessica Mitford. The reasons? "That she remained so different from the background that she came from, that her first husband died so young, that she lost two of her four kids in tragic circumstances - and yet she had no self-pity and a fabulous sense of humour right to the bitter end. I gave my daughter a copy of Mitford's [Hons and Rebels] for her christening."

She meant to leave Edinburgh after Christmas, but somehow never did. One rainy afternoon she told her sister, Di, the story of Harry and gave her those first chapters to read. "It's possible that if she hadn't laughed, I would have set the whole thing on one side," Rowling says today. But Di did laugh - and there followed six months of writing in conditions of poverty.

"I had no intention, no desire, to remain on benefits. It's the most soul-destroying thing. I don't want to dramatise, but there were nights when, though Jessica ate, I didn't. The suggestion that you would deliberately make yourself entitled . . . you'd have to be a complete idiot.

"I was a graduate, I had skills, I knew that my prospects long-term were good. It must be different for women who don't have that belief and end up in that poverty trap - it's the hopelessness of it, the loss of self-esteem. For me, at least, it was only six months. I was writing all the time, which really saved my sanity. As soon as Jessie was asleep, I'd reach for pen and paper."

She eventually got a part-time job and received a grant of £8,000 from the Scottish Arts Council. Coming at a moment of penury, that meant more than the multiple noughts from her recent American publishing deal. Rowling hasn't received that money yet, but she has already spent £100 on a jacket for television appearances.

Rowling stands to become a millionaire before she's 40. But caf life goes on. "Writing and cafs are strongly linked in my brain. I still write in longhand; I like physically shuffling around with papers; and you don't have to break off and go in the kitchen to make coffee."

She wheels an affectionate eye around the vast Nicolson's and looks up at the ceiling. "There are flats up above here," she says, thoughtfully. "I wouldn't even have to make breakfast . . ."